intellectual capital and marketing strategy intersect for increased sustainable competitive advantage

235 Pages·2007·0.54 MB·English

INTELLECTUAL CAPITAL AND MARKETING
STRATEGY INTERSECT FOR INCREASED
SUSTAINABLE COMPETITIVE ADVANTAGE

Charlene Rowena van Zyl
909900011

Dissertation

submitted in fulfilment of the requirements

for the degree

Magister Commercii

in

Strategic Management

in the

Faculty of Management

at the

University of Johannesburg

JOHANNESBURG Supervisor: Prof. FJ Herbst
May/2006 Co-supervisor: Prof. HEC de Bruyn
TABLE OF CONTENTS

CHAPTER 1

1.1 INTRODUCTION.......................................................................................1
1.2 BACKGROUND.........................................................................................1
1.2.1 SUSTAINABLE COMPETITIVE ADVANTAGE...................................................................................1
1.2.2 MARKETING STRATEGY AND THE MARKETING MIX......................................................................3
1.2.3 INTELLECTUAL CAPITAL..............................................................................................................5
1.3 PROBLEM STATEMENT..........................................................................8
1.4 OBJECTIVES OF THE STUDY.................................................................9
1.4.1 PRIMARY OBJECTIVE....................................................................................................................9
1.4.2 SECONDARY OBJECTIVES...........................................................................................................10
1.5 RESEARCH DESIGN AND METHODOLOGY........................................11
1.6 DEMARCATION AND LIMITATIONS OF THE STUDY..........................13
1.7 IMPORTANCE AND VALUE OF THE STUDY........................................13
1.8 CLARIFICATION OF KEY CONCEPTS..................................................14
1.9 CHAPTER OUTLINE...............................................................................16
1.10 CONCLUSION.......................................................................................17

CHAPTER 2

2.1 INTRODUCTION.....................................................................................18
2.2 COMPETITIVE ADVANTAGE DEFINED................................................18
2.3 THE EVOLUTION OF THE COMPETITIVE ADVANTAGE CONCEPT
.......................................................................................................................19
2.3.1 PORTER’S ENVIRONMENTAL/POSITIONING MODEL.....................................................................20
2.3.2 THE RESOURCE-BASED VIEW.....................................................................................................23
2.3.3 AN INTEGRATED APPROACH TO COMPETITIVE ADVANTAGE ANALYSIS......................................28
2.3.3.1 The integration of the two views.......................................................................................28
2.3.3.2 Integration with the evolving economy.............................................................................30
2.4 SUSTAINABLE COMPETITIVE ADVANTAGE.......................................32
2.5 SUSTAINABLE COMPETITIVE ADVANTAGE IN THE CURRENT
NETWORK ECONOMY.................................................................................36
2.6 CONCLUSION.........................................................................................42

CHAPTER 3

3.1 INTRODUCTION.....................................................................................43
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3.2 MARKETING STRATEGY AND SUSTAINABLE COMPETITIVE
ADVANTAGE................................................................................................44
3.2.1 INTERNAL MARKETING..............................................................................................................48
3.3 MARKETING STRATEGY AND THE MARKETING MIX........................49
3.4 THE DEVELOPMENT OF THE MARKETING MIX CONCEPT...............52
3.5 PROPOSED ALTERATIONS TO THE MARKETING MIX FOR
INCREASED SUSTAINABILITY AND COMPETITIVENESS .......................59
3.5.1 RELATIONSHIP MARKETING/MARKETING-ORIENTATION............................................................59
3.5.2 BRAND RECOGNITION................................................................................................................61
3.5.3 PERSONALISATION.....................................................................................................................61
3.5.4 PEOPLE......................................................................................................................................63
3.5.5 THE FIVE VS..............................................................................................................................65
3.5.6 PUBLICATIONS...........................................................................................................................66
3.6 CONCLUSION.........................................................................................68

CHAPTER 4

4.1 INTRODUCTION.....................................................................................69
4.2 INTELLECTUAL CAPITAL IN A DYNAMIC ENVIRONMENT................70
4.4 INTELLECTUAL CAPITAL AS THE KEY ENABLER OF SUSTAINABLE
COMPETITIVE ADVANTAGE.......................................................................76
4.5 INTELLECTUAL CAPITAL ELEMENTS.................................................83
4.5.1 HUMAN CAPITAL........................................................................................................................83
4.5.2 RELATIONSHIP CAPITAL.............................................................................................................85
4.5.3 STRUCTURAL CAPITAL...............................................................................................................87
4.5.4 ELEMENT INTERCONNECTEDNESS..............................................................................................89
4.6 CORE INTELLECTUAL CAPITAL INDICATORS...................................92
4.7 PROCESS OF INTELLECTUAL CAPITAL MANAGEMENT
INTEGRATION AND IMPLEMENTATION....................................................94
4.8 CONCLUSION.........................................................................................97

CHAPTER 5

5.1 INTRODUCTION.....................................................................................99
5.2 INTRODUCTION TO PARTNERSHIPS AND RELATIONSHIP
MARKETING...............................................................................................100
5.3 TRANSACTIONAL AND INNOVATION PARTNER CAPITAL.............104
5.3.1 INNOVATION CAPITAL..............................................................................................................104
5.3.2 TRANSACTIONAL CAPITAL.......................................................................................................107
5.3.2.1 Predictive customer relationship management...............................................................110
5.4 EMPLOYEE PARTNERSHIPS – LEVERAGING HUMAN CAPITAL....111
5.5 CUSTOMER PARTNERSHIPS.............................................................117
5.5.1 FURTHER BENEFITS OF CUSTOMER PARTNERSHIPS...................................................................122
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5.5.1.1 Maximising marketing productivity................................................................................122
5.5.1.2 Developing better customer contact strategies...............................................................123
5.5.1.3 Aiding strategic decisions...............................................................................................124
5.6 SUPPLIER PARTNERSHIPS................................................................126
5.6.1 FURTHER BENEFITS OF SUPPLIER PARTNERSHIPS......................................................................130
5.7 ALLIANCE AND CHANNEL PARTNERSHIPS.....................................132
5.8 BOARD PARTNERSHIPS.....................................................................134
5.9 INVESTOR/ANALYST PARTNERSHIPS..............................................135
5.10 MANAGING PARTNERSHIPS............................................................136
5.10 CONCLUSION.....................................................................................137

CHAPTER 6

6.1 INTRODUCTION...................................................................................138
6.2 PROPERTY (INTELLECTUAL) DEFINED............................................139
6.3 INNOVATION CAPITAL........................................................................140
6.3.1 BRANDS...................................................................................................................................140
6.3.1.1 Brand management.........................................................................................................145
6.3.2 PATENTS..................................................................................................................................147
6.3.2.1 Acquiring patent rights...................................................................................................149
6.3.2.2 Maintaining patent rights................................................................................................150
6.3.2.3 Efficient patent portfolio management............................................................................151
6.3.3 TRADEMARKS AND TRADE SECRETS.........................................................................................153
6.3.4 COPYRIGHTS............................................................................................................................154
6.4 PROCESS CAPITAL.............................................................................154
6.4.1. BUSINESS PROCESS MANAGEMENT..........................................................................................156
6.4.2 METHODOLOGY MANAGEMENT...............................................................................................158
6.5 ORGANISATIONAL CAPITAL..............................................................160
6.6 THE IMPACT OF PARTNERSHIP AND PROPERTY ON THE PRODUCT
LIFE-CYCLE................................................................................................164
6.6.1 INTRODUCTION........................................................................................................................164
6.6.2 GROWTH..................................................................................................................................165
6.6.3 MATURITY...............................................................................................................................165
6.6.4 DECLINE..................................................................................................................................166
6.7 CONCLUSION.......................................................................................166

CHAPTER 7

7.1. INTRODUCTION ..................................................................................168
7.2 OVERVIEW OF THE CARD HISTORY.................................................168
7.2.1 ASSOCIATIONS.........................................................................................................................171
7.3 VALUE INHERENT IN CREDIT CARDS...............................................173
7.3.1 ADVANTAGES TO CARDHOLDERS.............................................................................................173
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7.3.2 ADVANTAGES TO MERCHANTS.................................................................................................174
7.3.3 ADVANTAGES TO ISSUERS/BANKS............................................................................................175
7.4 CARD ISSUER STRUCTURE/FUNCTIONS.........................................175
7.5 CARD MARKETING..............................................................................178
7.5.1 ACCOUNT ACQUISITION...........................................................................................................178
7.5.2 MARKETING STRATEGY...........................................................................................................179
7.5.2.1 Product............................................................................................................................179
7.5.2.2 Place (population)..........................................................................................................181
7.5.2.3 Price................................................................................................................................181
7.5.2.4 Promotion.......................................................................................................................183
7.5.3 USAGE STIMULATION AND RETENTION MARKETING.................................................................183
7.6 CARD INDUSTRY ASSOCIATION INPUT............................................185
7.6.1 STUDY OVERVIEW AND DISCUSSION GUIDE USED TO SOLICIT INPUT.........................................185
7.6.2 CONSOLIDATED ASSOCIATION FEEDBACK................................................................................188
7.6.1 Summary of opinion...........................................................................................................188
7.6.2 Sustainable competitive advantage....................................................................................189
7.6.3 Customer relationships......................................................................................................190
7.6.4 Supplier relationships........................................................................................................191
7.6.5 Employee relationships......................................................................................................192
7.6.6 Process capital...................................................................................................................192
7.6.7 Brands................................................................................................................................193
7.6.8 Integration.........................................................................................................................194
7.7 DEVELOPMENT OF A NEW CARD MARKETING FRAMEWORK......195
7.8 CONCLUSION.......................................................................................198

CHAPTER 8

8.1 OVERVIEW............................................................................................200
8.2 KEY FINDINGS.....................................................................................201
8.3 APPLICATION OF KEY FINDINGS IN THE CARD INDUSTRY...........202
8.3 FRAMEWORK ADAPTATION AND APPLICATION/TESTING IN OTHER
INDUSTRIES...............................................................................................204

ANNEXURE A.............................................................................................226
THE USE OF INTANGIBLE ASSETS......................................................................................................226
CUSTOMER RELATIONSHIPS..............................................................................................................226
SUPPLIER AND CHANNEL/ALLIANCE MEMBER RELATIONSHIPS..........................................................227
EMPLOYEE KNOWLEDGE...................................................................................................................227
PROCESSES.......................................................................................................................................227
BRANDS............................................................................................................................................227
INTEGRATION...................................................................................................................................228
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LIST OF FIGURES

Figure 2.1 Components of strategic competitiveness..............................27
Figure 2.2 The four pillars of sustainability...............................................41
Figure 3.1 The relationship between marketing and corporate
strategy........................................................................................46
Figure 4.1 Organisational capital structure...............................................78
Figure 4.2 Linking of intangibles to strategic objectives.........................79
Figure 4.3 Excellence model factor pyramid.............................................82
Figure 4.4 Interaction between intellectual capital elements...................91
Figure 6.1 Managing brand equity............................................................142
Figure 7.1 Card issuer structure...............................................................177
Figure 7.2 Customer loyalty as the key output of retention
marketing.................................................................................184
Figure 7.3 Conceptual framework of partnership and property
infused card marketing strategy............................................196

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LIST OF TABLES

Table 4.1 Intangible resources and investments......................................80
Table 4.2 Core intellectual capital measures and indicators...................93
Table 5.1 Bureaucratic vs. relationship values.......................................102
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CHAPTER 1
INTRODUCTION TO THE STUDY

1.1 INTRODUCTION

In this chapter the background to the study and its three core aspects,
namely: sustainable competitive advantage; marketing strategy; and
intellectual capital, is explored. This is followed by a delineation of the
problem statement, study objectives and associated research design and
methodology. The chapter concludes with an exposition of the importance,
limitations and structure of the study.

1.2 BACKGROUND

The core concepts of sustainable competitive advantage, marketing strategy,
and intellectual capital are examined below.

1.2.1 Sustainable competitive advantage

The current conceptual definition of sustainable competitive advantage is as
follows: a sustainable competitive advantage is the prolonged benefit of
implementing some unique value-creating strategy not simultaneously being
implemented by any current or potential competitors, along with the inability to
duplicate the benefits of this strategy (Calcagno, 2000:Internet; Hoffman,
2000:Internet and Iverson, 2002:Internet).

Organisational strategic success is determined by the efficient and effective
application of organisation-specific competitive resources, as well as the
exploitation of the potential capabilities they provide. These resources
include: financial; physical; legal; human; organisational; informational; and
relational assets that must be rare, valuable, difficult to imitate and non-
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substitutable in order to fuel strategic competitiveness (Chaharbaghi & Lynch,
1999:48 and Fahy, 2000:94).

Leavy (2003:29) maintains that an organisation may possess numerous
resources and capabilities and still not achieve sustainable competitive
advantage. This is primarily due to the fact that a sustainable competitive
advantage must be created out of core capabilities and then subsequently be
maintained. Over the past 20 years, two primary perspectives have arisen to
explain how sustainable competitive advantage can be created and
maintained. These include market position and core competence. Regarding
the positioning perspective, strategic choice is primarily focused on the
structure of an organisation’s industry and how it may be shaped to the
organisation’s advantage, with the ultimate goal being to establish a privileged
and difficult to imitate position.

With regards to the core competence perspective, sustainable advantage is
rooted in the ability of organisations to decide which distinctive competencies
they wish to build and then to consider the market opportunities that would
best exploit them.

According to CGI Group Inc. (2001:2), the very nature of competitive
advantage is evolving. The advent of the information super-highway and the
digital era has enabled organisations to easily match current differentiators
whilst simultaneously creating new ones. Competitive advantage has thus
evolved from price to quality to customer service to real-time performance to
individualisation. The only way for organisations to develop a sustainable
competitive advantage is to develop their organisation-specific resources and
core competencies in a manner that will allow them to stay ahead of the
trends. “The only sustainable competitive advantage is the commitment to
keep evolving one’s strategy to stay current with the times” (KLM Inc.,
2002:Internet).

Sustainable competitive advantage is defined as above-average performance
in the long-run. However, the amount of time defining the “long-run” is never
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specified. If organisations can develop effective, dynamic, and evolving
competencies and resources, the time element is no longer a factor (Beal,
2001:Internet).

Porter (1991:98) points out that, in the end, only strategy can create
sustainable advantage, and such strategy must start with a different value
proposition. A strategy delineates a territory in which an organisation strives
to be unique. Strategy is also about making appropriate choices and trade-
offs as an organisation cannot be all things to all people.

An organisation must exploit its core capabilities and resources to create core
competencies (in the form of unique business activity systems) and
favourable market positions through the formulation of dynamic strategies
based on intangible assets: only then will the organisation be capable of
obtaining sustainable competitive advantage (Beal, 2001:Internet).

1.2.2 Marketing strategy and the marketing mix

Foxall (1992:385) defines marketing strategy as being an indication of how
each element of the marketing mix will be used to achieve the overall
marketing objectives. According to Kotler and Armstrong (2001:66), the
design of effective marketing strategies begins with a thorough competitor
analysis, where the organisation consistently compares the value and
resultant customer satisfaction delivered by its products, prices, channels, and
promotional activities with those of its competitors.

According to Du Plessis, Jooste and Strydom (2001:331), in order to survive
and to develop a sustainable competitive advantage, organisations should
satisfy the needs of their customers by adding value, i.e. by providing more
benefits to their customers than their competitors while simultaneously striving
to reduce costs. This can only be achieved via the effective application of the
marketing decision-making variables. These variables constitute the value mix
due to the fact that an organisation can add significant value to their
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